UPDATE 3-Kohl's profit beats Street; outlook falls short

* Q3 EPS of 63 cents, vs Wall Street view of 61 cts

* Q3 sales of $4.1 bln vs Wall Street view of $4.0 bln

* Sees Q4 EPS $1.14-$1.24, below Wall Street view

* Shares up 0.7 pct after 2 pct rise earlier
(Adds analyst comment, details from call, updates shares)

By Phil Wahba

NEW YORK, Nov 12 (Reuters) - Department store operator
Kohl's Corp (KSS.N) reported a larger-than-expected quarterly
profit on Thursday, but gave a holiday-period outlook that was
below Wall Street estimates.

Kohl's results echoed a report from rival Macy's Inc (M.N)
on Wednesday, showing that major department store chains are
trying to tone down expectations of a major consumer comeback
during the holidays.

Kohl's shares were up 0.7 percent at $54.95 on the New York
Stock Exchange in midmorning after rising nearly 2 percent
earlier in the session.

On Wednesday, Macy's beat profit expectations for its third
quarter, but shares fell 8.1 percent after its projections for
the final quarter of the year disappointed Wall Street.
[ID:nN11421601]

The strength of Kohl's exclusive brands and its price
positioning in the recession have protected it from a similar
investor backlash, an analyst said.

"Kohl's has continued to outperform most other department
stores in terms of same-store sales, and it is a value-oriented
chain," said Matt Arnold, an analyst with Edward Jones.

"Most retailers realize there is plenty of uncertainty in
terms of consumer demand and how aggressive competitors could
be with discounts in the fourth quarter," he said, explaining
the chains' cautious profit projections.

Kohl's Chief Executive Kevin Mansell said in a statement
that he expected customers "to continue to be conservative in
their spending during this holiday season."

In a later call with investors, Mansell said he expects the
"holiday season to continue to be a fight for market share."

As with other retailers, Kohl's has managed inventory more
tightly in the past year in an effort to avoid having to
sharply discount merchandise as it did last year.

Chief Financial Officer Wes McDonald said he expected
inventory levels in the fourth quarter to be similar to those
of a year earlier.

Q3 EXCEEDS EXPECTATIONS

Kohl's net profit rose 20 percent to $193 million, or 63
cents a share, in the third quarter ended Oct. 31, from $160
million, or 52 cents a share, a year earlier.

The analysts' average estimate was 61 cents per share,
according to Thomson Reuters I/B/E/S.

McDonald said that the chain's higher-margin exclusive
brands, which include the Simply Vera Wang and Dana Buchman
women's clothing lines, made up 45 percent of sales during the
quarter, an increase of 2.7 percentage points.

Sales rose 6.5 percent to $4.1 billion, just above
analysts' estimates of $4.0 billion, and sales at stores open
at least a year were up 2.4 percent.

Department stores have only recently begun to see sales
stabilize. Last week, Kohl's reported same-store sales had
risen 1.4 percent in October.

Kohl's forecast earnings of $1.14 to $1.24 per share for
its fourth quarter, which began this month. Analysts on average
were expecting $1.25, according to Thomson Reuters I/B/E/S.

Kohl's expects total sales to rise 3 to 6 percent in the
fourth quarter, with same-store sales ranging from a 1 percent
decline to a 2 percent gain.

Kohl's said it operated 1,059 stores at the end of the
third quarter, up from 1,004 a year earlier. The chain said it
planned to open 30 new stores in 2010, up from an earlier
forecast of 20 to 25 new locations.
(Reporting by Phil Wahba; Editing by Derek Caney, Lisa Von Ahn
and Matthew Lewis)